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Tight spaces – The meteoric rise of warehousing

  • marimac 

A healthy, strong supply chain consists not only of its moving parts, but also in reliable, accessible, and connected warehousing solutions. A fundamental problem that the business world is facing is the growing lack of warehousing space.

Increased consumption and demographic growth, coupled with heightened e-commerce fulfilment needs and expansion of safety stock, have resulted in warehouse space allocation being extremely pressed. Current trends point towards further tightening of available warehousing space.

Space is at a premium

Throughout 2021, companies experienced a need for more warehousing capacity, a trend that is set to increase throughout 2022. Pressure on retailers and wholesalers to reach more consumers, coupled with manufacturers looking to increase the agility of their supply chains as well as add more near-sourcing options, is a key driver in the need for more warehousing space than ever before.

UK market research firm, Interact Analysis, predicts that storage needs will drive double-digit growth in the global warehousing and fulfilment sector over the next five years, with more than half of warehouses set to be built in China, India, Germany, Japan, and the US.

Currently, Asia-Pacific accounts for the largest region in the warehousing and storage market, with at least 32.9% of global warehouses placed in the region. The second largest region is North America, where storage needs are growing fast.

Demand is not set to lessen

Real estate services firm, CBRE Group Inc., saw a sizable development of growth in warehousing needs across the United States, noting a record amount of companies signing on for warehouses with 1 million or more square feet in the US, an increase of 19% of such warehouses, since 2020. Logistics real estate fund, Prologis Inc., has also registered an increased need, estimating an increase of 800 million square feet of space needed to meet needs in the US, alone.

Additionally, logistics warehouse vacancy rates across the US are expected to remain historically low during 2022, following the extreme lows of 2021, where a modest 3.4% of warehouse space remained unutilised, despite 270 million additional sq. feet entering the market during the year.

Industry experts point to expanded e-commerce fulfilment services, combined with supply chain challenges, as a key reason as to why current warehousing space is being utilised fully, and is expected to be used fully throughout 2022. Fulfilment service footprint will need to double to meet the current demand, and if trends continue as is, the industry could face a shortfall of 140 million sq. ft of warehouse space in the US by 2024.

With roots in the pandemic and its aftermath, the trend of companies exploring and shifting to e-commerce options, where possible, is one that is here to stay. Whilst there are signs that e-commerce growth will flatten or slow once consumers are fully able to return to the in-store experience, there is also clear indication that much of the current growth in online retail, will remain at above pre-pandemic levels. Capacity will need to expand over time, by at least 15%, to accommodate normal inventory levels, and add more resilience to customer supply chains.

arehouse demand is expected to undergo double-digit-growth figures over the next five years. Image credit: Tham Yuan Yuan | Pixabay
arehouse demand is expected to undergo double-digit-growth figures over the next five years. Image credit: Tham Yuan Yuan | Pixabay

Source: Maersk